How Much of the Home Price Does a VA Loan Cover in California?

California military members and veterans tend to have a lot of questions about the VA home loan program. One of those questions has to do with the maximum financing amount available through this program:

How much of the home price does a VA loan cover in California?

In most cases, the Department of Veterans Affairs does not limit how much a person can borrow when using a VA loan. So you might be able to finance the entire home purchase with no down payment whatsoever.

Three Parties Involved in a VA Loan Transaction

To fully understand how this program works, you need to know about the three primary players involved in the process—the borrower, the lender, and the VA.

• The Borrower: In a VA loan-backed real estate transaction, the borrower is the person buying a home. This program is limited to military borrowers, primarily. To qualify for a VA loan in California, you must be a member of the military, a veteran, or a qualifying spouse as defined by the Department of Veterans Affairs.
• The Lender: The lender in this scenario is the bank, financial institution, or mortgage company that provides the funds for the VA loan. To participate in this program, a mortgage company must be approved by the U.S. Department of Veterans Affairs.
• The VA: The Department of Veterans Affairs (VA) plays a central role in loan transactions by guaranteeing a portion of the loan against loss if the borrower defaults. They also establish all guidelines and regulations for this program. But the VA does not lend money to borrowers.

So, as a borrower, you will apply for a VA loan through a mortgage lender in the private sector. If you meet the minimum eligibility requirements for this program, the VA will guarantee a portion of your loan to reduce the lender’s risk.

VA Loans Can Cover an Entire Home Purchase

Now that all of the players have been introduced, let’s revisit the question at hand:

How much does a VA loan cover for a home purchase in California?

Unlike other types of mortgage loans, a VA loan can cover the entire purchase price for a house in California. In fact, borrowers with sufficient income can often qualify for financing well above the $1 million threshold.

When your home loan covers the entire purchase price, it means you don’t have to put down any money up front. You’ll still encounter closing costs, which could add up to thousands of dollars. But you could potentially buy a home with no down payment.

According to the Department of Veterans Affairs website: “if you have full entitlement, you don’t have a VA loan limit.”

They go on to explain that “the VA-backed home loan limit refers to the amount we’ll guarantee (the maximum amount we’ll pay to your lender if you default on your loan). We don’t limit how much you can borrow to finance a home.”

This program offers other noteworthy benefits as well, such as flexible qualification criteria and competitive interest rates. But the fact that a VA loan can cover the entire home price clearly tops the list of benefits. It’s what makes this program special.

A $45,000 Benefit for California Home Buyers

As mentioned above, a VA loan can cover the entire home purchase price in California. And that’s a big deal when you consider the typical price tag for a house in the Golden State.

When this article was published, in February 2024, the median home value in California was around $750,000. That’s based on data provided by Zillow. And according to a survey conducted by Realtor.com, first-time home buyers “typically make a down payment amounting to only 6% of a home’s price.”

If we combine those two numbers (a $750,000 home price and a 6% down payment), we have an upfront investment of around $45,000.

But those borrowers who use a VA loan to purchase a home in California can avoid the down payment altogether, in most cases. So a typical home buyer might be able to dodge a $45,000 upfront investment on a typical home purchase, taking a major hurdle out of the picture.

Sometimes, you have to plug in the numbers to fully understand the benefits of a VA loan!

The Overlapping Benefits of 100% Financing

In most cases, eligible home buyers in California who use a VA loan can skip the down payment. This provides a number of secondary benefits as well.

Here are some of the biggest benefits for borrowers:

1. A faster path to homeownership. California veterans and service members can become homeowners without years of saving for a hefty down payment. The zero-down benefit essentially accelerates the home buying process, especially for younger buyers who might have less money in the bank.

2. Preserving your savings. By covering the full purchase price on a home, a California VA loan can help you retain your savings instead of wiping it out. This allows you to maintain an important safety net for emergencies, unexpected expenses, or other investments.

3. More buying power. Since you’re not sinking money into a down payment, a larger portion of your budget can go toward the actual purchase price. This in turn can allow you to buy a more expensive home—an important consideration in a pricey market like California!

4. Home improvements and repairs. By sidestepping the down payment with a VA loan, you’ll have more money to use for immediate renovations, upgrades, or essential repairs to customize the home to your liking.

Five Things to Take Away from This Article

We’ve covered a lot of information in this guide, and it’s all important. So let’s wrap up by summarizing some of the key points:

• California veterans and military members can use VA loans to cover 100% of the home purchase price.
• Borrowers must be military members, veterans, or qualifying spouses to use VA loans in California.
• The VA guarantees a portion of the loan to reduce the lender’s risk, but doesn’t lend money directly to borrowers.
• For eligible borrowers, a California VA loan can cover the entire purchase price even when it exceeds $1 million.
• Skipping the down payment can shorten the path to homeownership and help you preserve your savings.

Have questions? Bridgepoint Funding specializes in the VA home loan program and serves borrowers all across the state of California. Please contact us if you have questions about this program or need help getting started!